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Avoid the Appearance of Self-Dealing in Cause-Related Marketing

If you’re a cause marketer, especially if you’re a consultant like me or come from the nonprofit side of the equation, and if you stay at it long enough someone’s going to come to you with a cause-related marketing scheme that will… they tell you… somehow manage to put a little scratch in everyone’s pocket.

Frequently this involves a private foundation that they control or that they hope to start. And, commonly, it also involves a product or service that they sell or manufacture and which will, according to the plan, benefit the charity that they control or want to control.

If they don’t know much about charitable tax law in the United States, they’re also hopeful that the cause-related marketing promotion will spin out a charitable tax deduction somewhere in there for them, too.

I smile broadly, tell them that I’m not a lawyer and therefore can’t render a legal opinion. If they don’t know any nonprofit lawyers, I’m happy to provide a referral. And then I tell them what they’ve described to me has the appearance of being ‘self-dealing,’ which is verboten under U.S. law.

And whether or not it amounts to self-dealing, as a cause-related marketing campaign it’s probably self-defeating.

If the company is called Acme Cereal and they do a cause-related marketing campaign for a nonprofit called the Acme Cereal Foundation for Children Who Don't Eat Breakfast and the addresses of both entities are the same and their websites and marketing materials are very similar, people are going to wonder if that’s all legitimate. As a result, such a cause marketing campaign isn’t likely to do terribly well.

I saw an ad in Newsweek Magazine for something called Kimmie Cares dolls benefiting the Partners for a Cure Foundation. The website URL is Kimmiecares.com and it sells dolls and books meant to help mothers explain to their kids what happens to them when they get cancer and undergo invasive medical treatment.

The dolls come in six different versions and four ethnicities. Each comes with 35-page illustrated storybook and two doll wigs and a scarf for $39.99. When you buy one an unnamed portion of the proceeds benefits the Partners for a Cure Foundation, which is the branding for kimmiecares.com. The entities, in other words, are plainly related.

I looked at the most recent 990 (tax return) that Partners for a Cure filed and in 2005 they raised $6,549. By law nonprofits don’t even have to file a tax return if they take in less than $25,000 a year. Partners for a Cure 990 in 2005 was prepared by Deloitte Tax LLP, which is kind of overkill for a $6,500 return.

Let me hasten to add that I have no knowledge of whether or not Kimmie Cares and Partners for a Cure are doing anything illegal or even untoward.

But I can say that their cause-related marketing sucks.

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